Local startups need help to scale up the ladder and one day be big players in their respective sectors. We know about seed funding which has been the most common way to uplift startups.
However, with seed funding, the startups only get financial support. They lack a mentor to hold their hand along the way. This, reckoned the British government, is why Africa needs to start looking at corporate venture building.
Corporate venture building is a new way for corporations to engage with start-ups. It’s different from accelerators and corporate venture capital, but it shares a lot in common with them. In the same way, an accelerator has a specific cohort of start-ups, so does corporate venture building aim to build long-term relationships with selected companies. In fact, you could think of corporate venture building as accelerated corporate venture capital. It also shares similarities with corporate venturing considering they both involve corporates buying stakes in young businesses and providing mentorship as they grow.
A corporate venture building programme is a coordinated effort between a corporation and an individual or group of start-ups to identify, develop, and commercialise new ideas. Corporations may be looking to innovate outside of their existing business models, or they may want to build out their existing product line with new features and services.
However, corporate venturing typically focuses on later-stage companies looking for growth capital; whereas corporate venture building focuses on early stage ventures that need support building out their team or product before raising further funding rounds later on down the line.
Last week Thursday, the British government through UK-Kenya Tech Hub and digital Innovation firm Qhala, launched a corporate venture building programme to bolster partnerships between corporates and start-up companies in Kenya. Dubbed iHelix, the programme is expected to give companies a platform to showcase and leverage their key strengths in efforts to scout better ways of working allowing them to unlock billions in untapped opportunities in the digital economy.
“Given the unique and agile nature of start-ups in Kenya and the robust ecosystems that exist around corporates, it has long been an issue getting them to meet and work harmoniously to build products or systems jointly,” said Josephine Gauld, British Deputy High Commissioner to Kenya during the iHelix launch.
Corporate venture building isn’t just about investing in start-ups. It’s a bigger, more strategic play for companies to diversify and reach new markets. This approach is especially useful during periods of disruption and change, as it gives large companies the ability to start small and quickly adapt their strategies as they evolve.
The rise of corporate venturing can be attributed to three main trends: 1) technology advancements; 2) a desire for innovation; and 3) the need for greater connectivity between industries.
Forbes declares this combination an interesting one indeed. “People who work in large corporations and entrepreneurs tend to be different types of thinkers, with different risk thresholds. Start-ups have an appetite for risk and are hungry to move fast, whereas corporations may move slower, and have more predictable growth.”
While venture building may not be the best way for corporates to engage with startups, it is important that corporates continue to work with start-ups. The value of corporates partnering with startups comes from what they can learn from each other, as well as the opportunities they create together. Corporates can leverage venture building programmes to identify startups that are relevant to their business, assess whether working with those specific companies makes sense, and then determine how best to collaborate.
“Corporates felt start-up expectations did not match with reality and would threaten to sue over “ideas” that didn’t materialise successfully. Whereas start-ups felt corporates would somewhat bully them, acquire and execute their ideas without fair compensation,” Qhala CEO, Dr Shikoh Gitau said. Finding a nexus between these differences could see the development of innovative products and services that will boost the revenue base of small and large companies and spur economic growth, she added speaking in Nairobi.
This approach can help corporates avoid some of the pitfalls associated with venture building programmes by focusing on specific areas where cooperation would be mutually beneficial and beneficial for both parties involved.